Three of the commissioners of the FCC have voted on the Sirius (NASDAQ: SIRI) merger with XM Satellite (NASDAQ: XMSR). Two have voted in favor, and one has voted against. That leaves two other votes. In other words, the deal could still be killed.
One of the remaining commissioners has indicated that he would vote for the merger if the companies would agree to a six-year price cap on their services. According to The Wall Street Journal, "The offer was viewed as an attempt to start negotiations, but the companies so far are showing little interest in haggling."
Is it any wonder? The most recent earnings reports from the two companies indicate that, while their losses are getting smaller, their subscription growth rates are slowing. Each firm has more than $1 billion in debt and neither has ever had an operating profit. In other words, if the companies cannot raise their rates the chances of them becoming profitable are significantly curtailed.
The FCC may be putting Sirius and XM in an almost impossible position. If they are willing to make moves which could hurt their earnings longterm, they may get the votes they need for approval. If not, the merger could be scuttled.
The future of satellite radio is now based on two bad outcomes.
Douglas A. McIntyre is an editor at 247wallst.com
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Reader Comments (Page 1 of 1)
7-23-2008 @ 9:49AM
Ron R. said...
If our DC representatives want to freeze rates for six (6) years .. can only be seen as unconscionable. Surely this would be the kiss of death. Let me suggest .. three (3) year freeze (already agreed to) with the CPI being the rate of increase over years 4 thru 6.
Theoretically, if Washington controls the CPI the results will trickle down to the Satellite radio users.
COMMENTS ????????
7-23-2008 @ 9:55AM
Bill said...
Now dont we pay federal agencies to cripple companies who want to finally get to profit position. If the consumer does not want to pay for the sat service, there are lots of other ways to get entertainment. FCC should let the market control price rather than try to lock them into a six year agreement that may destroy them a couple years from now without flexability. look at the economy six years ago and who can really see six years down the road now days?
7-23-2008 @ 10:02AM
Ed said...
I wish they had made Exxon/Mobil freeze rates for 6 years....but no, they just approved that merger. Gasoline is something that effects almost everyone and satellite radio is something that people don't even need. Let the companies merge already!!!
7-23-2008 @ 10:51AM
Jeff said...
given that the merger was forbidden by the FCC at the start, I don't have an ounce of sympathy for the satellite radio sob story. The FCC laid out the rules and now it is changing them. Nothing like constantly moving the benchmarks to make an uber-disaster - just ask the FED. When did everything become managed by Brett Favre, anyway? Just end it.
7-23-2008 @ 11:22AM
John said...
These companies are dead anyway in 3 years. They have NO visibility for profits. Let them merge...and die.
7-23-2008 @ 11:21AM
Nick said...
McIntyre replaced a couple violin strings, but he's
playing the same old tune -- for the life of him, he
"can't see" innovative satellite radio rescuing the
flagging radio industry. Not necessarily comparing
SR's trek to that of cable TV, I would recommend
a review of cable TV's evolution from inception. In
other words, SR is a forceful medium destined for
proliferation, and FCC merge-approval is just one
of the formal exercises in promoting clear sailing.
In every corner of the country, the near-flawless
universal reception of strongly attractive SR is in
demand.
7-23-2008 @ 3:23PM
Art said...
This blog is badly outdated...Should be pulled.
7-25-2008 @ 10:06AM
Art said...
This blog is out of date. Read the latest news. This should be pulled...
7-27-2008 @ 5:23PM
Tom said...
Huh???? FCC vote was last Friday....